Flie No. 817.51/549.

The Legation of Nicaragua to the Department of State.

[Memorandum handed to the Secretary of State by the Nicaraguan Minister on July 24, 1913—Not a translation.]

nicaraguan statistics.

1. The indebtedness of the Government of Nicaragua consists of the following:

A. $6,200,000, a bonded loan issued by the Ethelburga Syndicate of England and secured by a first lien on the customs receipts to the extent, of $31,500 monthly. Interest at 5%. This loan exists until paid off by these monthly payments with the option to the Government to pay off the entire amount at 92 if paid in 1913 or at rates gradually approaching par if paid within the next seven years. This bonded debt is a legacy of the Zelaya Government. It was contracted in 1909 at 75, bearing 6% interest. A part was used to fund earlier debts, a part was brought to Nicaragua and practically wasted, and about $1,800,000 was retained by the Ethelburga Syndicate in its coffers until it would be used for railroad construction. Though the syndicate thus retained this sum, it nevertheless collected 6% interest thereon. The loan was guaranteed by all the customs receipts, the liquor and tobacco taxes, the Government railroad and steamers, and any other property which the Government might have. The hope of American assistance in obtaining a new loan enabled the present Government of Nicaragua to make a very favorable compromise with the bondholders, according to which the interest rate was reduced to 5%, the Government was given the option of redeeming the bonds at much less than par if redemption took place at an early date and the large sum held by the Ethelburga Syndicate was turned over and used to pay New York bankers amounts advanced for establishment of stable currency. If there is no American assistance and no new loan can be made, the interest will again become 6% and the Republic will be obliged to pay par on these bonds.

B. $750,000 to Brown Bros. & Co. and J. & W. Seligman & Co. of New York being secured by the balance of the customs receipts and bearing interest at 6% per annum due October 15, 1913. This is the balance remaining of sums aggregating $2,655,000 which have gradually been advanced by the bankers since January, 1912, at par. The remaining portion of the debt has been paid off from the customs receipts and out of the Ethelburga money above referred to. The [Page 1044] greater part of the money so advanced by the New York bankers has been used for the establishment of a small National Bank (the only real bank in Nicaragua) the retirement of the discredited paper money and the establishment of a stable currency with sufficient reserve.

C. $1,500,000 to miscellaneous creditors of the Government for salaries unpaid, supplies furnished, advances made, etc. This is the debt which is causing the most trouble and is most urgent. Upon finding that assistance would soon be obtained under the convention signed with the United States the Nicaraguan Government made the contracts above referred to with New York bankers for the establishment of a sound currency, and a great part of the Government’s income has been used for the payment of the New York bankers, the local creditors being neglected. Payment has been deferred for too long a time, however, the smaller creditors are becoming restless and the larger ones are on the verge of bankruptcy. Unless the Government can obtain adequate funds within a very short time there will be many failures throughout the country. Even now business is stagnant and a crisis is plainly imminent.

D. Approximately $3,000,000 in claims against the Government growing out of revolutions and bad government. The nominal amount of the claims will probably exceed ten million but it is believed they can be scaled down to three millions or perhaps less. Many of these claims are for property taken by Government forces during the recent wars. The failure to pay them has caused suffering among the poor countrymen whose entire movable property was sometimes taken. It is very urgent that as many as possible of these claims be paid.

2. The total annual receipts of the Government are approximately as follows:

Customs receipts $1,500,000
National Railroad of Nicaragua 150 miles long and in good condition 400,000
Excise tax on liquors and tobacco 1,255,000
Internal Revenue 400,000
Total 3,555,000

The Annual Budget expenditures of the country are approximately three millions dollars. This sum is distributed among the five departments of the Government approximately as follows:

Interior Department and Police $800,000
War 700,000
Foreign Affairs and Public Instruction 400,000
Treasury (including cost of alcohol and tobacco, which are Government monopolies) 800,000
Public Works, including postal, telegraph and telephone service 300,000
Total 3,000,000

These sums do not include extraordinary expenditures of the Government in the case of war or disturbance of the public peace. Unfortunately such extraordinary expenditures have in the past sapped the life blood of the Republic.

Whenever the public peace is threatened it is necessary for the Government to increase the army and equip it well; payments in other than the War Department must be suspended and thus the interior debt growls. Unless the unruly spirits are curbed by the [Page 1045] fear of foreign intervention no government in Nicaragua can avoid incurring enormous ordinary and extraordinary expenses for war purposes.

3. The size of Nicaragua is about 49,000 miles, a little larger than Louisiana or Cuba and about fourteen times as large as Porto Rico. Owing to its many wars and misgovernments, Nicaragua has been unable to develop its enormous natural resources, and its commerce is now only a little over $8,000,000 per annum as compared with over $236,000,000 for Cuba, and over $92,000,000 for Porto Rico. The population is approximately 600,000.